AUD/CAD medium-term parity case builds, on metal boom and RBA outlook

Australian Dollar has taken a clear leadership role among commodity currencies as the new year starts, outperforming peers as powerful tailwinds from metals markets combine with resilient domestic rate expectations.

Iron ore prices surged to their highest level since February, driven by optimism over Chinese macro support and seasonal restocking ahead of the Lunar New Year. That confidence was underlined by fresh guidance from the PBoC which said it will deploy interest-rate cuts, reserve-requirement reductions and other tools in a flexible and efficient manner to maintain ample liquidity and support credit growth.

Policymakers also pledged to step up counter-cyclical and cross-cyclical adjustments, boost domestic demand and manage financial risks, signaling a determination to stabilize growth early in the new five-year planning cycle. For commodity exporters, the message has been unambiguously supportive.

Also, Copper has delivered an additional boost, pushing to a fresh series of record highs. The rally has been driven by supply-side disruptions and deepening concerns over medium-term availability rather than short-term speculative flows.

Production setbacks at several major mines, including Freeport­McMoRan’s Grasberg operation, have tightened global supply. At the same time, demand expectations continue to rise due to Copper’s critical role in construction, energy transition, artificial intelligence data centers and defense industries.

Back home, November CPI data in Australia surprised to the downside, reducing pressure for an immediate February rate hike by the RBA. Even so, the broader policy outlook remains tilted toward tightening rather than easing.

Underlying inflation pressures are easing only slowly, particularly in services, keeping policymakers cautious. Markets still expect rates to remain on hold in February but see a high likelihood of a hike by June and another before the end of the year.

That policy-commodity mix has translated directly into Aussie strength. Technically, AUD/CAD has broken decisively above 0.9256 resistance, confirming resumption of the uptrend from 0.8440 (2025 low). Next upside target stands at 100% projection of 0.8440 to 0.9041 from 0.8902 at 0.9503.

More importantly, the upside breakout strengthens the case that the entire corrective decline from the 0.9991 (2021 high) ended at 0.8440. Medium-term focus now shifts to 0.9545, where decisive break would argue that the longer-term rise from the 2020 low at 0.8058 is ready to resume toward parity.